[Federal Register Volume 63, Number 85 (Monday, May 4, 1998)]
[Notices]
[Pages 24584-24585]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-11745]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39924; File No. SR-DTC-98-01]


Self-Regulatory Organizations; The Depository Trust Company; 
Order Granting Accelerated Approval of Proposed Rule Change to Conform 
DTC's Rules to Revised Article 8 of the Uniform Commercial Code of the 
State of New York

April 27, 1998.
    On January 14, 1998, The Depository Trust Company (``DTC'') filed 
with the Securities and Exchange Commission (``Commission'') a proposed 
rule change (File No. SR-DTC-97-14) pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'').\1\ Notice of the proposal 
was published in the Federal Register on April 14, 1998.\2\ The 
Commission received no comment letters in response to the filing. For 
the reasons discussed below, the Commission is granting accelerated 
approval of the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 39836 (April 7, 1998), 
63 FR 18239.
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I. Description

    The rule change amends DTC's rules to make them consistent with 
revised Article 8 of the Uniform Commercial Code (``UCC'') as adopted 
by the State of New York. Generally, the revisions to Article 8, which 
governs the transfer of securities, reflect that the transfer of 
ownership of securities and other investment vehicles are no longer 
effected by the delivery and holding of certificates. Instead, 
securities are transferred by debits and credits to securities accounts 
maintained by securities intermediaries. The rule change adds new 
terminology to DTC's rules,\3\ revises certain definitions,\4\ and 
deletes section references based on the prior version of Article 8. The 
amendments do not change the substance or meaning of DTC's current 
rules.
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    \3\ The proposed rule change will add the following terms to 
DTC's rules: (1) Certificated security; (2) control; (3) deposit; 
(4) entitlement holder; (5) entitlement order; (6) free pledge; (7) 
free release; (8) NYUCC; (9) person; (10) pledge; (11) pledge versus 
payment; (12) release; (13) release versus payment; (14) security 
entitlement; (15) security certificate; (16) uncertificated 
security; and (17) withdrawal.
    \4\ The proposed rule change will make technical revisions to 
the following terms: (1) Clearing agency agreement; (2) deliverer; 
(3) delivery; (4) deposited security; (5) incomplete transaction; 
(6) instructor; (7) minimum amount securities; (8) net addition 
securities; (9) participant; (10) payee; (11) payor; (12) pledge 
security; (13) pledgee; (14) pledgor; (15) receiver; (16) securities 
account; (17) security; (18) segregated account; and (19) settlement 
amount.
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    The rule change also amends DTC Rule 20 to specifically state that 
DTC's board of directors may be resolution delegate to the chairman of 
the board the power to approve fees and charges.

II. Discussion

    Section 17A(b)(3)(F) \5\ of the Act requires that the rules of a 
clearing agency be designed to assure the safeguarding of securities 
and funds which are in the custody or control of the clearing agency or 
for which it is responsible. The Commission believes that the proposed 
rule changes are consistent with this requirement because by conforming 
its rules to the revised Article 8 of the UCC, DTC should help maintain 
certainty with respect to the substantive rights and obligations under 
New York State's version of the UCC that are applicable to DTC and its 
participants.
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    \5\ 15 U.S.C. 78q-1(b)(3)(F).
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    The Commission also believes that providing DTC's board of 
directors with the authority to delegate to the chairman of the board 
the power to approve fees and charges is consistent with this 
requirement because it allows DTC's board to act more expeditiously.
    DTC has requested that the Commission find good cause for approving 
the proposed rule change prior to the thirtieth day after the date of 
publication of notice of the filing. The Commission finds good cause 
for approving the proposed rule change prior to the thirtieth day after 
publication in order to enable DTC to revise its rules to be consistent 
with New York State's version of Article 8 of the UCC as soon as 
possible.\6\
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    \6\ The staff of the Board of Governors of the Federal Reserve 
System has concurred with the Commission's granting of accelerated 
approval. Telephone conversation between Kristen Wells, Senior 
Analyst, Division of Reserve Bank Operations, Board of Governors of 
the Federal Reserve System, and Jeffrey Mooney, Special Counsel, 
Division of Market Regulation, Commission (April 24, 1998).
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III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of Section 17A of the Act and the 
rules and regulations thereunder.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-DTC-98-01) be, and hereby 
is, approved on an accelerated basis.

[[Page 24585]]

    For the Commission by the Division of Market Regulation, pursuant 
to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-11745 Filed 5-1-98; 8:45 am]
BILLING CODE 8010-01-M